Industry
Overview
The insurance industry provides protection against financial losses
resulting from a variety of perils. By purchasing insurance policies,
individuals and businesses can receive reimbursement for losses due to
car accidents, theft of property, and fire and storm damage; medical
expenses; and loss of income due to disability or death.

Industry
OrganizationThe
insurance industry consists mainly of insurance carriers and insurance
agencies and brokerages. In general, insurance carriers are large
companies that provide insurance and assume the risks covered by the
policy. Insurance agencies and brokerages sell insurance policies for
the carriers. While some of agencies and brokerages are directly
affiliated with a particular carrier and sell only that carrier's
policies, many are independent and are thus free to market the policies
of a variety of insurance carriers.

In addition to these two primary components, the insurance industry
includes establishments that provide other insurance-related services,
such as claims adjustment or third-party administration of insurance and
pension funds. These other insurance industry establishments also
include a number of independent organizations that provide a wide array
of insurance-related services to carriers and their clients. One such
service is the processing of claims forms for medical practitioners.
Other services include loss prevention and risk management. Also,
insurance companies sometimes hire independent claims adjusters to
investigate accidents and claims for property damage and to assign a
dollar estimate to the claim.

Insurance
carriers assume the risk associated with annuities and insurance
policies and assign premiums to be paid for the policies. In the policy,
the carrier states the length and conditions of the agreement, exactly
which losses it will provide compensation for, and how much will be
awarded. The premium charged for the policy is based primarily on the
amount to be awarded in case of loss and the likelihood that the
insurance carrier will actually have to pay. In order to be able to
compensate policyholders for their losses, insurance companies invest
the money they receive in premiums, building up a portfolio of financial
assets and income-producing real estate which can then be used to pay
off any future claims that may be brought. There are two basic types of
insurance carriers: primary and reinsurance. Primary carriers are
responsible for the initial underwriting of insurance policies and
annuities, while reinsurance carriers assume all or part of the risk
associated with the existing insurance policies originally underwritten
by other insurance carriers.

Primary insurance carriers offer a variety of insurance policies. Life
insurance provides financial protection to beneficiaries—usually spouses
and dependent children -- upon the death of the insured. Disability
insurance supplies a preset income to an insured person who is unable to
work due to injury or illness, and health insurance pays the expenses
resulting from accidents and illness. An annuity (a contract or a group
of contracts that furnishes a periodic income at regular intervals for a
specified period) provides a steady income during retirement for the
remainder of one's life. Property-casualty insurance protects against
loss or damage to property resulting from hazards such as fire, theft,
and natural disasters. Liability insurance protects policyholders from
financial responsibility for injuries to others or for damage to other
people's property. Most policies, such as automobile and homeowner's
insurance, combine both property-casualty and liability coverage.
Companies that underwrite this kind of insurance are called
property-casualty carriers.

Some
insurance policies cover groups of people, ranging from a few to
thousands of individuals. These policies usually are issued to employers
for the benefit of their employees or to unions, professional
associations, or other membership organizations for the benefit of their
members. Among the most common policies of this nature are group life
and health plans. Insurance carriers also underwrite a variety of
specialized types of insurance, such as real-estate title insurance,
employee surety and fidelity bonding, and medical malpractice insurance.

Other organizations in the industry are formed by groups of insurance
companies, to perform functions that would result in a duplication of
effort if each company carried them out individually. For example,
service organizations are supported by insurance companies to provide
loss statistics, which the companies use to set their rates.

Recent
DevelopmentsThe recent financial
crisis has resulted in large losses for the insurance industry. Industry
conditions in the near term remain tenuous, particularly as many
companies will continue to experience declining revenues, investment
losses, and credit rating downgrades, which can affect an insurer’s
ability to repay debt by having to pay a higher interest rate.
Additionally, insurance companies who were trading in credit default
swaps and other risky instruments without sufficient hedging suffered
especially hard, and some companies even became insolvent. Companies
with prudent risk management strategies also suffered large losses,
because most investment instruments owned by insurance companies
experienced falling values as they were being sold or marked down as the
stock market deteriorated in late 2008. Nonetheless, as insurers rebuild
capital and adhere to stricter Federal regulations, the insurance
industry is likely to stabilize.

Insurance carriers now
sell products traditionally associated with other financial
institutions, such as banks and securities firms. These products include
securities, mutual funds, and various retirement plans. The Internet is
an important tool for insurance carriers in reaching potential and
existing customers. Carriers use the Internet to enable customers to
access online account and billing information, submit claims, view
insurance quotes, and purchase policies. In addition to individual
carrier-sponsored Internet sites, several "lead-generating" sites have
emerged. These sites allow potential customers to input information
about their insurance policy needs. For a fee, the sites forward
customer information to a number of insurance companies, which review
the information and, if they decide to take on the policy, contact the
customer with an offer. This practice gives consumers the freedom to
accept the best rate.

Working
Environment Many
workers in the insurance industry -- especially those in administrative
support positions -- work a 5-day, 40-hour week. Those in executive and
managerial occupations often put in more than 40 hours. There are
several occupations in the insurance industry where workers may work
irregular hours outside of office settings. Those working in sales jobs
need to be available for their clients at all times. This accommodation
may result in these individuals working 50 to 60 hours per week. Also,
call centers operate 24 hours a day, 7 days a week, so some of their
employees must work evening and weekend shifts. The irregular business
hours in the insurance industry provide some workers with the
opportunity for part-time work. Part-time employees make up 8 percent of
the workforce.

Insurance employees
working in sales jobs often visit prospective and existing customers'
homes and places of business to market new products and provide
services. Others working in the industry may need to frequently leave
the office to inspect damaged property, and at times can be away from
home for days, traveling to the scene of a disaster -- such as a
tornado, flood, or hurricane -- to work with affected policyholders and
various government officials.

A small, but
increasing, number of insurance employees spend most of their time on
the telephone working in call centers, answering questions and providing
information to prospective clients or current policyholders. These jobs
may include selling insurance, taking claims information, or answering
medical questions.

EmploymentThe
insurance industry had about 2.3 million wage and salary jobs in 2008.
Insurance carriers accounted for 61 percent of jobs, while insurance
agencies, brokerages, and providers of other insurance-related services
accounted for 39 percent of jobs.

The majority of establishments in the insurance industry were small;
however, a few large establishments accounted for many of the jobs in
this industry. Insurance carriers tend to be large establishments, often
employing 250 or more workers, whereas agencies and brokerages tend to
be much smaller, frequently employing fewer than 20 workers.

Many insurance
carriers' home and regional offices are situated near large urban
centers. Insurance workers who deal directly with the public are located
throughout the country. Almost all of those working in sales work out of
local company offices or independent agencies. Many others in the
industry work for independent firms in small cities and towns throughout
the country.

Degree
Paths into this Industry
About 42 percent of insurance workers are in office and administrative
support jobs such as those found in every industry (table 1). Many
office and administrative support positions in the insurance industry,
however, require skills and knowledge unique to the industry. About 29
percent of insurance workers are in management or business and financial
operations occupations. About 17 percent of wage and salary employees in
the industry are sales and related workers, selling policies to
individuals and businesses. About 11 percent are in professional and
related occupations, including many computer and mathematical science
occupations.

About 29 percent of
insurance workers are in management or business and financial operations
occupations. About 17 percent of wage and salary employees in the
industry are sales and related workers, selling policies to individuals
and businesses. About 11 percent are in professional and related
occupations, including many computer and mathematical science
occupations.

Industry
ForecastWage
and salary employment in the insurance industry is projected to grow
about 3 percent between 2008 and 2018, compared to the 11 percent growth
projected for wage and salary employment in all industries combined.
While demand for insurance is expected to rise, job growth will be
limited by industry consolidation, corporate downsizing, productivity
increases due to new technology, and increasing use of direct mail,
telephone, and Internet sales. Additionally, the recent financial crisis
has resulted in large losses for the insurance industry, phenomena that
will result in more prudent risk management and lower revenues. However,
insurers should rebuild their capital and continue to expand into the
broader financial services field, resulting in some job growth.

Significant growth is
expected over the long term, even though increasing health insurance
premiums have recently become difficult for some people to afford. As
the members of the baby boom generation grow older and a growing share
of the Nation's population moves into the older age groups, more people
are expected to buy health insurance and long-term-care insurance, as
well as annuities and other types of pension products sold by insurance
sales agents. If reforms are enacted that makes health insurance
affordable to more people, the number of people covered by some form of
health insurance will likely be affected.

Population growth also
will stimulate demand for auto insurance and homeowners insurance. Also,
population growth will create additional demand for businesses to
service the needs of more people, and these businesses will need
insurance as well. In addition, growing numbers of individuals and
businesses are purchasing liability policies to protect against possible
large awards from lawsuits brought by people claiming injury or damage
from a product.

Many successful
insurance companies will recognize the Internet's potential as a
powerful marketing tool, increasing employment growth of some
occupations while slowing growth of others. Growing use of the Internet
might reduce costs for insurance companies, but it also could enable
many clients to turn first to the Internet to get information on their
policies, obtain price quotes on possible new policies, or submit
claims. As insurance companies begin to offer more information and
services on the Internet, employment in some occupations, such as
insurance sales agents, could be adversely affected.

Productivity
gains caused by the greater use of computer software will continue to
limit the growth of certain jobs within the insurance industry. For
example, upgrades to underwriting software have helped increase
underwriter productivity. Automated underwriting quickly rates and
analyzes insurance applications, reducing the need for underwriters. In
addition, adoption of this technology into other segments of insurance,
such as life and health and long-term care, will result in declining
employment of underwriters. Workers in claims now may not have to visit
the site of customers' damage; they may use satellite imagery to inspect
the damage from their computers. In addition, the Internet allows
insurance investigators to handle an increasing number of cases by
drastically reducing the amount of time it takes them to perform
background checks, limiting the additional investigators that must be
hired to handle a growing workload. Also, computers have made
communications easier among sales agents, adjusters, and insurance
carriers—making all much more productive—by linking them directly to the
databases of insurance carriers and other organizations. Furthermore,
insurance carriers contain costs by increasing using customer service
representatives to deal with the day-to-day processing of policies and
claims.

Workers in property
and casualty insurance, particularly in auto insurance, will be most
affected by increasing reliance on the Internet. Auto policies are
relatively straightforward and can be issued more easily without the
involvement of a live agent. Also, auto premiums tend to cost more per
year than do other types of policies, so people are more likely to shop
around for the best price -- and the Internet makes it easier to compare
rates among companies.

Insurance companies
will continue to face increased competition from banks and securities
firms entering the insurance markets. As more of these firms begin to
sell insurance policies, they will employ increasing numbers of
insurance sales agents. In order to stay competitive, more insurance
companies are expanding the range of financial products and services
they offer, or are establishing partnerships with banks or brokerage
firms.

Although employment in
the insurance industry is expected to grow slowly, thousands of openings
are expected to arise reflecting the need to replace workers who leave
the industry, retire, or stop working for other reasons. Despite the
fact that the internet allows many people to buy policies online, many
sales agents still will be needed to meet face-to-face with clients;
some customers prefer to talk directly with an agent, especially
regarding complicated policies. Opportunities will be best for sales
agents who sell more than one type of insurance or financial service.
Opportunities should be good for adjusters because they will still be
needed to inspect damage and interview witnesses as the insurance
industry, the Nation's population, and the number of claims all grow.
Even though the number of available jobs will be small, opportunities
should be good for qualified actuaries because many people are
discouraged from following this career path due to the stringent
requirements of the examination system.